If Tesla moves its production facilities to China, it could help the entire electric vehicle (EV) market there grow bigger, according to the founder of a Chinese EV start-up.

"I think Tesla, a very good brand in the electric vehicle market, coming into China actually helps the whole electric vehicle market become bigger and become stronger versus the traditional cars," says Freeman Shen, founder of WM Motor.

The Chinese government has said that it will remove the strict ownership caps on EVs by the end of the year, allowing foreign companies to wholly own businesses in China. Previously, they were required to enter into joint ventures with local Chinese companies in order to operate in the domestic market.

Qilai Shen | Bloomberg | Getty Images

A Tesla Motors Model S electric automobile at one of the company's electric charging stations in Beijing on March 9, 2016.

Speaking at Auto China, Shen told CNBC's Nancy Hungerford that while he would welcome Elon Musk to Shanghai, he's unsure if that would happen, citing Tesla's recent production issues in the U.S. as a potential barrier.

"For automotive business, it's not only about the ownership," Shen said. "I think more importantly, it's the supply chain itself." While opening up a factory in China is "relatively easy," localizing the entire supply chain would take time, he said.